A prescription drug is a licensed medicine that is regulated by legislation to require a prescription before it can be obtained. The term is used to distinguish it from over-the-counter drugs which can be obtained without a prescription. Different jurisdictions have different definitions of what constitutes a prescription drug. As a general rule, over the counter drugs are used to treat conditions not necessarily requiring a doctor's care and will have been proven to meet higher safety standards for self-medication by patients. Often a lower dosage of a drug will be approved for OTC use, while higher dosages will remain the province of a doctor's prescription; a notable case is ibuprofen, which has been widely available as an OTC pain killer since the mid-1980s but is still available in doses up to four times the OTC dose for use in cases of severe orthopedic pain.

In the United States, the term "prescription drug" is most commonly used, but they are also called legend drugs or Rx-only drugs, after the requirements of Federal and state laws that all such drugs bear a "legend" prohibiting sale without a prescription; though more complex legends have been used, on most original drug packaging today the legend simply says "Rx only". In the United Kingdom, they are referred to as Prescription Only Medicine or POM.

Dispensation of prescription drugs often includes a package insert (in Europe, a Patient Information Leaflet or PIL) that gives detailed information about the drug.

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In the United States, the Federal Food, Drug, and Cosmetic Act defines what requires a prescription. Prescription drugs are generally authorized by doctors, though physician assistants and nurse practitioners do an increasing amount of drug prescribing. It is generally required that an MD,DO,PA or NP write the prescription; nurses (other than nurse practitioners), emergency medical technicians, psychologists (but not psychiatrists, who are MDs), as examples, do not generally have the authority to prescribe drugs. Unlike many other countries, the United States does not have price controls for prescription drugs, and US drug prices are often perceived as inflated in comparison to other countries; therefore, most health insurance programs (generally partially or in full paid for by the patient's employer) have prescription payment plans where the patient pays only a small copayment and the pharmacy is reimbursed for the rest of the cost by the insurance company.

In the United Kingdom, a patient visits a general practitioner who is able to prescribe medicines. If given an NHS prescription, this can be taken to a pharmacy to be dispensed. District nurses and health visitors have had limited prescribing rights since the mid-nineties where prescription for dressings and simple medicines would have had to have been signed by a doctor. Extended prescribing was introduced in late 1999, where appropriately trained nurses could prescribe from a limited list of POMs. From 2006, some nurses and pharmacists will be permitted to prescribe all medicines in the British National Formulary, except controlled drugs directly. Each item on the prescription is liable to a prescription charge of £6.65 (as of April 2006), although many patients are exempt from this charge. This includes those over 60, under 16, patients with certain medical conditions and those on certain benefits.

An HC2 certificate can be applied for — although not automatically granted — by those on a low income or in receipt of incapacity benefit. Claimants of "Jobseekers" and "Income support" automatically receive free prescriptions and dentistry.

Those requiring regular prescriptions may make a saving by purchasing a pre-payment certificate which covers the cost of all prescriptions required for four months or a year. This charge is paid entirely to the NHS through the pharmacy, while the pharmacy claims the cost of the medicine dispensed. Each "item" can cover any prescribed item in a very large or very small quantity according to the doctor's prescription. This means that the patients perceived "value" of the charge varies enormously - the actual cost of the medicine given out will routinely vary from a few pence to hundreds of pounds.

The majority of items dispensed on NHS prescription are exempt from charges. This is because of the large number of medicines needed by, for example, the elderly or those with medical exemptions. NHS prescriptions can also be written for certain items by dentists and nurses. Some patients also receive private prescriptions, typically either from a doctor seen privately or for medicine not permitted on the NHS. For these, the patient will pay the pharmacy directly for the cost of the medicine and the pharmacy's markup.

The devolved legislature in Wales has decided to phase out prescription charges altogether; this process is expected to be completed during 2007. In January 2006, similar proposals were made by the health committee of the Scottish Parliament; however, these were rejected by Health Minister Andy Kerr on the grounds that "Executive policy remains that it is right that patients who can afford to should continue to contribute towards NHS dispensing costs".